Economics Vocabulary Builder B1A

The process of gradually paying off a debt through regular payments over time

The bank explained that with amortization, most of her early mortgage payments would go toward interest rather than the loan principal.

The practice of buying and selling the same asset in different markets to profit from price differences

The trader made money through arbitrage by buying gold in London and selling it in New York at a higher price.

Government policies that reduce spending and increase taxes to control debt

The government's austerity measures included cutting education funding and raising income taxes.

Economic efficiency lost when supply and demand are not in balance, often due to taxes or regulations

The high tax on cigarettes created deadweight loss as fewer people bought them and tax revenue was lower than expected.

A decrease in the value of something over time

The car's depreciation was so rapid that it lost half its value in just two years.

A financial contract whose value depends on the price of another asset

He bought a derivative that would increase in value if oil prices went up.

How much the demand for a product changes when its price changes

Gasoline has low elasticity because people still need to drive even when prices go up.

Extremely rapid and uncontrolled increase in prices that makes money almost worthless

During hyperinflation, people needed wheelbarrows full of money just to buy bread.

Using borrowed money to make investments in order to potentially earn higher returns

The company used leverage to buy the building, putting down only 20% and borrowing the rest.

How easily an asset can be converted into cash without losing value

Stocks have high liquidity because you can sell them quickly, but real estate has low liquidity.

A situation where one company controls the entire market for a particular product or service

The company had a monopoly on internet service in the town, so residents had no other options.

A situation where people take bigger risks because they know someone else will pay if things go wrong

Bank deposit insurance creates moral hazard because people don't worry about choosing safe banks since the government protects their money.

The process of a government taking control of private companies or industries

The nationalization of the oil industry meant that the government now owned all the oil companies.

A market situation where only a few large companies control most of the sales

The airline industry is an oligopoly because just four major companies handle most flights.

The process of transferring government-owned businesses to private ownership

The privatization of the postal service allowed private companies to compete in mail delivery.

The ability of a person or company to pay their debts when they are due

The bank questioned the company's solvency after seeing their high debt and low income.

Buying and selling assets hoping to make quick profits, often with high risk

His speculation in cryptocurrency paid off when Bitcoin prices doubled, but he could have lost everything.

An economic situation where inflation and unemployment are both high at the same time

The country experienced stagflation in the 1970s when prices rose rapidly while many people lost their jobs.

Money given by the government to help reduce the cost of producing goods or services

The government provided a subsidy to farmers to help keep food prices affordable for consumers.

A tax placed on goods imported from other countries

The new tariff on steel imports made foreign steel more expensive than domestic steel.